Open Thread - Friday, June, 19, 2015

The scourge of structural inequality.

A tax system that targets workers

Imagine a society with two tax systems. One taxes the wealth people have accumulated. The other taxes the labor people perform. This society seems to be getting along well enough, raising enough tax revenue to finance the public goods and services that voters have told lawmakers they want to see supported.

Now imagine that lawmakers have decided to cut the tax rates on wealth and raise them on labor. At the same time, the amount of wealth subject to the lower tax rates is rising as income from labor is shrinking.

That society, we would agree, is asking for trouble. In real life, would any society choose to take such an unsustainable course? One already has — the United States since 1980.

What happened in 1980?

Inequality as Policy
The United States Since 1979

Since the end of the 1970s, the United States has seen a dramatic increase in economic inequality.
While the United States has long been among the most unequal of the world’s rich economies, the
economic and social upheaval that began in the 1970s was a striking departure from the movement
toward greater equality that began in the Great Depression, continued through World War II, and
was a central feature of the first 30 years of the postwar period.
Despite the magnitude of the rise in inequality, the political discourse in the United States refers
only obliquely to these developments. The public debate generally acknowledges neither the scale
of the increase in inequality nor, except in the most superficial way, the causes of this sudden and
sustained turn of events.

The United States of Inequality

Liberal politicians and activists have long argued that the federal government caused the Great Divergence. And by "federal government," they generally mean Republicans, who have controlled the White House for 20 of the past 30 years, after all. A few outliers even argue that for Republicans, creating income inequality was a conscious and deliberate policy goal. Until recently, the consensus among academics—even most liberal ones—was quite different. Economists argued that the Great Divergence was the result not of Washington policymaking but of larger "exogenous" (external) and "secular" (long-term) forces. In June, the Congressional Budget Office calculated that spending by the federal government made up 23 percent of U.S. gross domestic product, after averaging 18.5 percent during the previous four decades. But even with federal spending at this unusually high level (necessitated by a severe recession), Washington's nut remains less than one-quarter the size of the economy. Most of that nut is automatic "entitlement" spending over which Washington policymakers seldom exert much control. Brad DeLong, a liberal economist at Berkeley, expressed the prevailing view in 2006: "[T]he shifts in income inequality seem to me to be too big to be associated with anything the government does or did."My Slate colleague Mickey Kaus took this argument one step further in his 1992 book The End of Equality, positing that income inequality was the inevitable outgrowth of ever-more-ruthlessly efficient markets, and that government attempts to reverse it were certain to fail. "[Y]ou cannot decide to keep all the nice parts of capitalism," he wrote, "and get rid of all the nasty ones." Instead, Kaus urged liberals to combat social inequality by nurturing egalitarian civic institutions (parks, schools, libraries, museums) and by creating some new ones (national health care, national service, a revived WPA) that remove many of life's most important activities from the "money sphere" altogether.

Tracing the Source of Income Inequality

The second half of Thomas Piketty’s provocative book, Capital in the 21st Century, addresses the structure and causes of economic inequality as he lays out recommendations for how to deal with what he sees as this pervasive and long-ignored problem. [For Part One of this review, click here.]

In this context, Piketty’s focus shifts to a detailed examination of income inequality in the United States, the combination of capital and earnings. He notes that at the end of the Nineteenth Century, American income distribution was more equitable than in Europe, in part, because the U.S. had fewer rentiers — landowners renting land to small farmers — and they were not as wealthy as those in Europe.

Then, despite the ups and downs of the Roaring Twenties, the Depression-era Thirties and World War II of the Forties, the trend by the middle of the century was toward a more equitable America. From 1950 to 1980, the level of inequality in America was at its lowest ebb in the century. Piketty noted that the top 10 percent owned about 30 to 35 percent of total wealth, a relatively modest amount.

How does inequality effect society?

Economic inequality, democratization
and civil conflict
Measuring the long-run effects

The democratization literature has suggested the possibility of a dynamic interplay between
democratization and civil conflict (see Boix 2003; Acemoglu and Robinson 2006).
In this thesis I argue that regime changes and civil conflict in many instances are so closely
associated, that they should be studied in conjunction. I develop an analytical framework
where economic inequality is seen as an important determinant for the speed and ease
of democratization, and for the amount of civil conflict observed during its course. High
inequality is hypothesized to both cause regime instability and violence.

Remember to warm up before throwing rocks.

Eyes open, know your enemy.

Break the chains.

Everybody awake?

Feel free to vent or rant, we can all howl at the moon.

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Big Al's picture

say this. I've said many times that U.S. imperialism is the most racist element in human history. From slavery to
native American genocide to the War OF Terror against Muslims, U.S. imperialism targets and destroys those different
from the white man. Those that support U.S. imperialism are in effect supporting racism and therefore are in effect racists.
Those that support those that order and facilitate the War OF Terror, i.e., people like Obama, Clinton, Kerry and Biden,
are in effect supporting racist imperialism and therefore in effect racists.

That's why it's so ironic to see the partisans on Daily Kos so angry at the right wing racism in this country while they also
support the most racist element on earth, U.S. imperialism, Barack Obama, Hillary Clinton and the Democratic party.
In effect, it's racists angry at other racists.

This is U.S. imperialism in action. Where is the outcry about that?

"Saudi-led airstrikes hit a convoy of civilians fleeing violence in southern Yemen on Wednesday, killing at least 31 people, medical officials said, making it among the deadliest single attacks since the air campaign against Shia rebels and their allies began nearly three months ago."

http://america.aljazeera.com/articles/2015/6/17/saudi-led-strikes-on-yem...

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Big Al's picture

put it out there more.
I'm disgusted at the hypocrisy.

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Out of the 12 diaries, 9 of them were about racism.
Where does one who is concerned about things other than racism go?

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mimi's picture

diaries about racism and the verbal demonstration of outrage should not discourage you from posting there. I would say, to the contraray, they need your diaries and issues there, because it's all so much talk about racism and so little walk. Just plug along. Dailykos is like main stream media living off the outrage du jour. Very tiring. But what else can you do ?

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LapsedLawyer's picture

They need that particular brick slammed up side their collective heads.

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"Our society is run by insane people for insane objectives. I think we're being run by maniacs for maniacal ends and I think I'm liable to be put away as insane for expressing that. That's what's insane about it."
-- John Lennon

Big Al's picture

I can take it further and call them terrorists like they want to call the entire right wing of the United States to help
facilitate racist imperialism and the racist New World Order. Those supporting the racist U.S. Empire War OF Terror
are racist terrorists. There we go.

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It's the height of hypocrisy to be outraged because a cop shot an unarmed black man in Detroit, while not caring in the slightest about our bombers killing an unarmed black family in the middle east.
The entire concept of racism is based on differing values of human worth.

Go ahead and write it up. I'll rec it.

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Big Al's picture

Differing values of human worth. But they aren't different to the families and friends of those killed. We're all
the same and it hurts all the same whether innocent humans in Charleston or Yemen.

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It's not ok to shoot black people, but it is ok to kill them slowly with poor nutrition, bad health care, etc. And if you think a redistribution of the money and power from the one percent down will do more for civil rights than "whitesplaining" and "blacksplaining" that makes you a racist too. When they get going on their feeding frenzies, the best thing is to stay out of the water.

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"Religion is what keeps the poor from murdering the rich."--Napoleon

link

It’s official, using proceeds from debt sales to send cash to stockholders has never been more popular.

Standard & Poor’s 500 Index companies listed buybacks or dividends among the use of proceeds in $58 billion of bond deals in the past three months, the most on record, according to data compiled by Bloomberg and Sundial Capital Research Inc. More than $460 billion in repurchases were announced during the first five months of 2015, on pace to top last year’s record.

Going into debt to goose stock prices sounds like short-term payoff at the cost of long-term bankruptcy.

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LapsedLawyer's picture

In a system of production, where the entire continuity of the reproduction process [the process by which capital realizes increased returns, and is thus "reproduced" to be reinvested] rests upon credit, a crisis must obviously occur-a tremendous rush for means of payment -- when credit suddenly ceases and only cash payments have validity. At first glance, therefore, the whole crisis seems to be merely a credit and money crisis. And in fact it is only a question of the convertibility of bills of exchange into money. But the majority of these bills represent actual sales and purchases, whose extension far beyond the needs of society is, after all, the basis of the whole crisis. At the same time, an enormous quantity of these bills of exchange represents plain swindle, which now reaches the light of day and collapses; furthermore, unsuccessful speculation with the capital of other people; finally, commodity-capital which has depreciated or is completely unsaleable, or returns that can never more be realised again. The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England [or The Federal Reserve], give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values. Incidentally, everything here appears distorted, since in this paper world, the real price and its real basis appear nowhere, but only bullion, metal coin, notes, bills of exchange, securities. Particularly in centres where the entire money business of the country is concentrated, like London [or New York], does this distortion become apparent; the entire process becomes incomprehensible; it is less so in centres of production.

Karl Marx, Capital, Volume III, Chapter 30

This is a game of Russian roulette the business elite are engaged in. When it crashes and burns, I hope we and others like us are the ones in place to engage the workers and the disaffected of society to pick up the pieces and start anew.

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"Our society is run by insane people for insane objectives. I think we're being run by maniacs for maniacal ends and I think I'm liable to be put away as insane for expressing that. That's what's insane about it."
-- John Lennon

link

Drillers are devoting more revenue than ever to interest payments. In one example, Continental Resources Inc., the company credited with making North Dakota’s Bakken Shale one of the biggest oil-producing regions in the world, spent almost as much as Exxon Mobil Corp., a company 20 times its size.

The burden is becoming heavier after oil prices fell 43 percent in the past year. Interest payments are eating up more than 10 percent of revenue for 27 of the 62 drillers in the Bloomberg Intelligence North America Independent Exploration and Production Index, up from a dozen a year ago. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank.

“The question is, how long do they have that they can get away with this,” said Thomas Watters, an oil and gas credit analyst at Standard & Poor’s in New York. The companies with the lowest credit ratings “are in survival mode,” he said.

I think Saudi Arabia is eventually going to win the price war.

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NCTim's picture

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The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche -